> ## Documentation Index
> Fetch the complete documentation index at: https://docs.talcottforge.com/llms.txt
> Use this file to discover all available pages before exploring further.

# What is ROBS?

> Rollover for Business Startups (ROBS) lets eligible retirement savings capitalize a business through a compliant 401(k) structure.

**ROBS (Rollover for Business Startups)** is a legal mechanism for using existing retirement savings (IRA, prior 401(k), or other qualified plans) to capitalize a business without triggering an immediate taxable distribution, early-withdrawal penalty, business debt, or outside equity dilution.

Nexus 401(k) by Talcott Forge is built around this structure. It is designed for **sovereign founders**: experienced operators who have accumulated meaningful pre-tax retirement balances and want to deploy that capital into a business they will own and operate.

## How ROBS Works

<Steps>
  <Step title="Form a C-Corporation">
    You create a new C-Corporation. This entity type is required because only C-Corps can issue stock that a 401(k) plan can purchase. This is mandated by IRC 401(a).
  </Step>

  <Step title="Establish a 401(k) Plan">
    The C-Corporation adopts a 401(k) plan that permits investment in employer stock (the company's own shares).
  </Step>

  <Step title="Roll Over Retirement Funds">
    You roll over funds from your existing retirement account (Traditional 401(k), Rollover IRA, SEP-IRA, etc.) into the new company's 401(k) plan. This is a trustee-to-trustee transfer - no taxes are triggered.
  </Step>

  <Step title="Purchase Company Stock">
    The 401(k) plan uses the rolled-over funds to purchase stock in the C-Corporation at the documented transaction value.
  </Step>

  <Step title="Fund the Business">
    The C-Corporation now has the stock sale proceeds as working capital. You operate the business as a working owner and W-2 employee.
  </Step>
</Steps>

## Is ROBS Legal?

Yes. ROBS is explicitly permitted under **IRC 4975(d)(13)** and **ERISA 408(e)**, which exempt the acquisition of qualifying employer securities by an eligible individual account plan when done for adequate consideration and without commission.

The IRS does not prohibit ROBS - in fact, the IRS published examination guidance in **Memo 2008-01-021** specifically for how to audit ROBS transactions, which acknowledges the structure as a recognized planning strategy.

<Warning>
  While ROBS is legal, it is actively scrutinized by the IRS Employee Plans Compliance Unit. Compliance errors trigger a **15% excise tax** on prohibited transactions (IRC 4975), with an additional **100% tax** if the transaction is not corrected within the taxable period. Professional administration is essential.
</Warning>

## Who is ROBS For?

ROBS is designed for founders who:

* Have **\$50,000 or more** in eligible pre-tax retirement savings
* Plan to be a working owner and employee of the new business
* Are starting a new business, buying an existing one, or purchasing a franchise
* Want capital without taking on debt or diluting ownership

## Where Nexus Fits

ROBS is not just a funding mechanism. It creates an operating structure with a C-Corporation, a company-sponsored 401(k) plan, plan trust assets, corporate governance, and annual administration requirements.

Nexus handles the setup work and standard ongoing administration: C-Corp formation, 401(k) plan and trust setup, rollover coordination, capitalization support, compliance deadline tracking, annual filing support, required plan maintenance, valuation coordination, and entity administration support.

<Note>
  Talcott Forge prepares, coordinates, and administers key parts of the structure. The founder remains responsible for operating the business as a working owner, making fiduciary decisions prudently, maintaining proper separation between personal, corporate, and plan assets, keeping the corporation in good standing, and avoiding prohibited transactions.
</Note>

## ROBS vs. Other Funding Options

| Method                  | Tax Impact               | Debt?           | Equity Dilution?  | Speed             |
| ----------------------- | ------------------------ | --------------- | ----------------- | ----------------- |
| **ROBS**                | None (tax-free rollover) | No              | No                | 2–4 weeks typical |
| Early 401(k) withdrawal | 10% penalty + income tax | No              | No                | 1–2 weeks         |
| SBA loan                | None                     | Yes (repayment) | No                | 4–12 weeks        |
| Angel/VC                | None                     | No              | Yes (significant) | Months            |
| Personal savings        | None                     | No              | No                | Immediate         |

<CardGroup cols={2}>
  <Card title="Check Eligibility" icon="check" href="/robs/eligibility">
    See if you qualify for ROBS
  </Card>

  <Card title="View the Process" icon="list-check" href="/robs/process">
    Review the detailed customer flow
  </Card>
</CardGroup>